The Effects of Prior Outcomes on Managerial Risk Taking: Evidence from Italian Professional Soccer

Publication date: Available online 20 July 2018Source: Journal of Economic PsychologyAuthor(s): Alessandro Bucciol, Alessio Hu, Luca ZarriAbstractA growing empirical literature documents that managerial risk taking is linked to an individual’s history of relevant personal and professional experiences. Using male soccer data on 32 teams and 2,160 matches covering eight seasons of the Italian premier league (“Serie A”), we provide clean evidence that change in managerial risk taking – proxied by a team coach’s decision to alter the initial system of play in a match – significantly depends on having experienced wins or defeats in the recent past. In particular, we show that prior outcomes matter, as change in risk taking strongly and positively depends on prior defeats. Single defeats and heavy defeats make the coaches more risk seeking (opting for more offensive systems of play), while multiple defeats make the coaches less risk seeking. Changing risk taking, though, does not seem to pay off in terms of match outcomes. Finally, we interestingly document that in top teams managerial risk taking is not sensitive at all to prior outcomes, regardless of their positive or negative direction.
Source: Journal of Economic Psychology - Category: Psychiatry & Psychology Source Type: research